After the network outage storm, Bank of America still bullish on Cloudflare (NET.US): Although damaging to reputation, it does not affect the fundamentals, maintaining a "buy" rating.

Bank of America Corp said that a service disruption by cybersecurity company Cloudflare (NET.US) on Tuesday caused multiple popular apps and websites to crash, potentially posing "some reputation risks" to the company but unlikely to be a long-term issue. It was reported that on November 18, Cloudflare's global services experienced an interruption, causing a large number of users to be unable to access major internet platforms including social media X and ChatGPT. Spokesperson Jackie Dutton stated in a release that the incident was due to an autogenerated configuration file used to manage threat traffic. The statement mentioned that there is currently no evidence of a network attack or malicious activity. "After last month's service disruptions by Amazon.com, Inc. (AMZN.US) AWS and Microsoft Corporation (MSFT.US) Azure, this incident with Cloudflare once again exposes the inherent dependency risks of large infrastructure service providers," wrote Bank of America Corp analyst Tomer Zilberman in a report to clients. "We are still awaiting further clarification from the company on this event, but we believe the long-term impact of this incident will be relatively limited." Zilberman gave Cloudflare a "buy" rating with a target price of $255. He noted that despite Cloudflare handling around 20% of global internet traffic, any potential credit compensations and discounts offered will have a "very limited" impact on the company. Zilberman added, "Therefore, Cloudflare's products can still maintain customer stickiness, and the cost of switching to other CDN providers remains high. However, service reimbursements and discounts may pose some short-term resistance as the company addresses customer concerns about reputation and reliability. But we believe the impact on revenue is limited, maintaining revenue expectations for the fourth quarter of 2025 and the first quarter of 2026 to grow year-over-year by 31% and 29%, respectively, exceeding the market's general expectation of 28%."